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TaxTMI 
TaxTMI 
TaxTMI 
2016 (5) TMI 1340
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....p and paper industries. The assessee company filed its return of income declaring loss of Rs. 1,18,38,710/-. The Assessing Officer (hereinafter referred to as the AO), however, made certain disallowances including disallowance of royalty expenditure amounting to Rs. 23,66,000/- and adhoc disallowance travelling expenses amounting to Rs. 29,74,525/-. The AO also made addition of Rs. 6,28,700/- under section 69C of the Act on account of AIR information. The AO made certain other disallowances on account of professional fees etc. and thus assessed the total income of the assessee at Rs. 61,71,950/- as against the returned loss of Rs. 1,18,38,710/-. 3. In appeal, the Ld. CIT(A) deleted the disallowance of royalty expenditure. He, however, confirmed the disallowance of travelling expenses amounting to Rs. 29,74,525/-. The Ld. CIT(A) also confirmed addition amounting to Rs. 6,28,700/- under section 69C of the Act out of addition made of Rs. 60,98,920/- made by the AO. The Revenue, thus, has come in appeal before us agitating the action of the Ld. CIT(A) in deleting the disallowance of royalty expenditure; whereas the assessee has come in appeal before us agitating the confirmation of ....
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....of details filed by the assessee during the remand proceedings, it was noticed that as per the terms of the agreement dated 13.01.03 entered with CBC Ltd., the assessee was entitled to receive royalty payment @ 14% on net sales value of products against which the assessee had to make a payment @ 5% to its parent company M/s. Hercules INC, USA. However, as per the assessee there was an amended agreement dated 29.03.05 with CBC Ltd. as per which on product 'Hercon and Impress' the royalty payable was 5% and for other products it was settled at 14%. It was also submitted that the said agreement was produced before the AO during the assessment proceedings vide letter dated 29.11.10. It was therefore claimed that the royalty expenditure was correctly computed in the return of income. The AO, however, reported that the amended agreement dated 29.03.05 could not be relied upon as the original agreement and the amended agreement were respectively signed by different directors of the government. The AO further noted that since the assessee acquired technical knowhow at the rate of 5% from parent company and it was not probable that the assessee company would sale the same at the same rate o....
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....ravelling expenses made on adhoc basis at the rate of 15%. The assessee has also agitated the confirmation of addition of Rs. 6,28,700/- under section 69C of the Act. 12. So far as the disallowance of travelling expenditure is concerned, the AO noted that the assessee had debited an amount of Rs. 59,49,051/- under the head 'Travelling Expenditure'. The AO observed that though the assessee had claimed the said expenditure was incurred on account of visits of its employees to the customers, however, the assessee had not furnished any details as to the names and addresses of the customers and the details of business procured. He, further observed that as per the clause 9.3 of the agreement of the assessee with CBC Ltd., all the expenses relating to sale, distribution and other expenses were to be borne by the CBC Ltd. He accordingly disallowed the 50% of the travelling expenses claimed by the assessee. 13. In appeal, the assessee relied upon the clause 9.6 of the agreement which states that in an effort to assist the licensee (CBC Ltd.) with development of its business for the sale of products, the licensor (assessee) may from time to time send its own representatives to visit t....
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....ell Bros. Co. ( India) Pvt. Ltd. in connection with the manufacture, distribution and sale of the products were to be borne and paid for by M/s Connell Bros. Co. (India) Pvt. Ltd. The expenses in question on traveling however were incurred by the assessee as licensor and not by M/s Connell Bros. Co. (India) Pvt. Ltd. as licensee and the same, in our opinion, therefore were covered by clause 9.6 of the agreement which required the assessee as licensor to send from time to time its own representatives to visit the customers and promote the licensee's business with the said customers in an effort to assist the licensee with development of its business for the products. The said expenses therefore were to be borne and paid for by the assessee as per clause 9.6 of the agreement and the authorities below, in our opinion, were not justified in disallowing 50% of the traveling expenses of the assessee relying on clause 9.3 of the agreement which covered only expenses and risks incurred by the licensee. It is also observed that the traveling expenses claimed by the assessee were inclusive of foreign travel expenses which as stated specifically by the assessee in the written submissions ....
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....as detailed in the AIR information, that no such payment was made by the assessee. The AO, however, observed that since there was a specific AIR information. He, therefore, treated the above expenditure aggregating to Rs. 60,98,920/- as 'unexplained' under section 69C of the Act and added the same to the returned income of the assessee. 17. During the remand proceedings, the assessee furnished the confirmation from American Express Bank along with copies of the bank statement and stated that there was multiple payments amounting to Rs. 54,70,621/- and that all these payments were made through American Express Credit Card and for the purpose of travelling expenses totaling to Rs. 54,70,220/-. The AO, considering the above documents, reported in the remand report that the assessee had submitted the explanation regarding the expenditure of Rs. 54,70,220/-. He, however, recommended the confirmation of disallowance of the remaining amount of Rs. 6,28,700/-. The Ld. CIT(A) accordingly confirmed the disallowance of the amount of Rs. 6,28,700/- under this head. 18. The Ld. A.R. of the assessee has brought our attention to page 69 of the paper book which is a confirmation given by the....